EU summit ends without budget deal

BRUSSELS: A European Union summit charged with agreeing on a long-term budget for the 27-nation bloc has broken up without a deal.
European Council President Herman Van Rompuy, who presides over the summits, that the national leaders had told him and European Commission President Jose Manuel Barroso to continue working toward consensus over the coming weeks.
Van Rompuy said the “constructive discussions” at the summit meant that an agreement could be reached early next year. Barroso, too, called the talks constructive. But he added, “we are not yet at the point of reaching consensus.”
The prospect of failure had loomed over the EU leaders’ summit, charged with agreeing on a 1 trillion euros ($1.25 trillion) long-term spending plan for the 27-country bloc, even before the meeting began. Some countries wanted the budget to rise, other wanted to it to fall — and all had veto power.
Van Rompuy tried to thread the needle. He proposed a budget with some cuts. But in a post-summit press conference he offered a nod to those countries who believe greater spending is essential to kickstart some recession-hit countries’ economies.
“Growth in one country benefits all,” he said.
The EU budget primarily funds programs to help farming and spur growth in the bloc’s less developed countries. In financial terms, the budget amounts to only about 1 percent of the EU’s gross domestic product, but carries great political significance as it lays bare the balance of power between the bloc’s members.
The bloc found itself divided, notably between richer countries that wanted to contain their contributions to the common budget at a time of economic malaise, and poorer ones that rely on EU money for development aid and economic investment.
British Prime Minister David Cameron was the most vocal leader demanding restraint, while French President Francois Hollande wanted the budget to keep paying subsidies for farming and development programs for poorer nations.
A revised proposal late Thursday by Van Rompuy appeared to do little to appease either side. It kept the same total of 972 billion euros ($1.25 trillion) in states’ commitments as his first proposal — 21 billion euros less than the 2007-2013 budget — but it shifted some money away from investment projects toward aid for farming and development.
There is no set deadline for a deal, but the closer it gets to 2014, the tougher it will be for a smooth introduction of new programs. If there is no deal up to 2014, there would be a rollover of the 2013 budget plus a 2 percent increase accounting for inflation.
Meanwhile, Cyprus’ potential international creditors said yesterday they have made “good progress” in negotiations on a possible bailout for the crisis-hit country.
Despite earlier hopes that a deal was imminent, they said long-distance talks would continue on securing an agreement that will make Cyprus the fourth euro country to receive international help with its debts.
Representatives from the so-called troika of the European Commission, the European Central Bank and the International Monetary Fund said they are awaiting the preliminary results of an investigation into how much Cyprus’ ailing banks will need to shore up their finances. This will help determine the size of a bailout that won’t push the country’s debt to unsustainable levels.
“Discussions are expected to continue from respective headquarters with a view to making further progress toward a potential program,” a troika statement said.
In its own statement, the Cypriot government said it had reached “a convergence” on proposals that will make up the bailout agreement. It said the preliminary estimate on the banks’ recapitalization needs which is expected in early December will move negotiations forward so that Cyprus’ euro partners can rubber-stamp a bailout accord when they meet next month.
The exact figure on the banking sector’s needs is crucial, given its large size relative to the Cypriot economy. Credit ratings agency Fitch said Friday that the banks’ assets are worth four times the size of the country’s 17.5 billion euros ($22.5 billion) economy.
The Cypriot government said parliamentary approval from euro zone member countries is expected to come at the end of January when Cyprus will be able to draw the cash it needs from the EU bailout fund to keep its banks and economy afloat. It also said Cypriot President Dimitris Christofias would soon address the nation on the bailout deal.
The European Union’s Monetary Affairs Commissioner Olli Rehn welcomed the “decisive progress” made in bailout talks.
“I consider this an important step toward full agreement on an assistance program for Cyprus which can be finalized once the interim results of the due-diligence exercise are known and after agreement by the eurogroup,” Rehn said in Brussels.
Cyprus sought international aid in June to save its banking sector from collapse after banks failed to replenish huge losses they suffered on bad Greek debt and loans.
The size of the bailout is estimated to range between 14-17.5 billion euros ($18-22.5 billion).
Most of that is expected to go to recapitalizing banks, while around 7.5 billion euros will be channeled to refinancing the country’s debt and to cover fiscal shortfalls over the deal’s four-year implementation timetable.
Cyprus, which is one of 17 EU countries to use the euro, has been unable to borrow from international markets for over a year because of its junk credit rating.

Al-Rasub is a news aggregate website that accumulates major news sources around the globe. All content is hand-picked in order to pull the best stories produced by a wide variety of other news organizations.